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"Business Tax Reform Proposals in Massachusetts: Policy Options for New England States"

"Business Tax Reform Proposals in Massachusetts: Policy Options for New England States". presented at ECONOMIC PERSPECTIVES ON STATE AND LOCAL TAXES Lincoln Institute of Land Policy Cambridge, MA Robert Tannenwald Vice President and Director New England Public Policy Center

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"Business Tax Reform Proposals in Massachusetts: Policy Options for New England States"

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  1. "Business Tax Reform Proposals in Massachusetts: Policy Options for New England States" presented at ECONOMIC PERSPECTIVES ON STATE AND LOCAL TAXES Lincoln Institute of Land Policy Cambridge, MA Robert Tannenwald Vice President and Director New England Public Policy Center Federal Reserve Bank of Boston 600 Atlantic Avenue Boston, MA 02459 617-973-3093 robert.tannenwald@bos.frb.org The information contained in these slides does not necessarily represent the views of the Federal Reserve Bank of Boston or the Board of Governors of the Federal Reserve System

  2. New England has been through tough times before… BSI Boston Sports Index Index 1920=1 (Babe Ruth traded to the Yankees, the curse begins) Red Sox 2007 WS Champs Celtics Reign of Terror (57-69) Red Sox come back to beat Yankees in ALCS and win WS Multiple Bruins and Celtics Championships Patriots Super Bowl Wins Celtics? Pats 16-0 and no Super Bowl Buckner! Yankees win Game 7 ALCS with walk-off homerun Notes: Red Sox given favorable weights.

  3. Combined Unitary Reporting: Major Recommendation of the Massachusetts Corporation Tax Study CommissionThe Basic Concept

  4. Apportionment by Formula

  5. Single Factor Apportionment Based on Sales Sales in State ______________ Total Sales

  6. State Corporate Income Tax Treatment of Northland Steel—Single Multi-State Corporation 1725 2300 575 200 8.7% 50.0 4.9

  7. State Corporate Income Tax Treatment of Northland Steel—Conglomerate Consisting of Two Separately Incorporated Affiliates No Tax Planning 300 1200 1500 2000 500 10% 50 4.9 225 300 75 0 4.9

  8. State Corporate Income Tax Treatment of Northland Steel—Conglomerate Consisting of Two Separately Incorporated Affiliates Tax Planning 500 1200 1700 2000 300 10% 30 2.94 225 500 275 0 2.94

  9. Tax Planning Reduces Tax Burden of Company by $1,960 or 40%

  10. State Corporate Income Tax Under Combined Unitary Accounting 300 275 575 200 500 1800 2500 0.08 46 4.508

  11. Combined reporting results in lower tax bill than under accurate separate accounting (not true in all instances)

  12. Computing Minnesota Taxable Profits Under Combined Reporting vs. Separate Accounting: A Smaller Slice of a Larger Pie

  13. New England Public Policy Center Federal Reserve Bank of Boston 600 Atlantic Avenue Boston, MA 02210 617-973-4257 robert.tannenwald@bos.frb.org http://www.bos.frb.org/economic/neppc/

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